Western: CHINAHONGQIAO (01378) future operating net cash flow remains strong, maintain "buy" rating.

Western released a research report stating that CHINAHONGQIAO (01378) will see a year-on-year growth in revenue and profits in 2025, with a net profit attributable to shareholders of over 26 billion after adding back the fair value changes of financial instruments, exceeding expectations. With the company's capital expenditure decreasing, the bank speculates that the company's future operating cash flow will be more abundant. The estimated EPS for the years 2026-2028 are 3.24, 3.50, and 3.78 respectively, with PEs of 9, 9, and 8 times, maintaining a "buy" rating. The main points of Western are as follows: Event: The company announced its annual report for 2025, with revenue of 162.354 billion, a year-on-year increase of 3.96%; net profit attributable to shareholders was 22.636 billion, a year-on-year increase of 1.18%; proposed dividend of HK$1.65 per share. When adding back the fair value changes of financial instruments, the performance meets expectations, and the operating cash flow is particularly outstanding. According to the company's 2025 annual report, revenue was 162.354 billion, a year-on-year increase of 3.96%; net profit attributable to shareholders was 22.636 billion, a year-on-year increase of 1.18%; the main reason was the fair value change of financial instruments at -3.782 billion (affected by changes in the market value of convertible bonds). If this fair value change is added back, the net profit attributable to shareholders will exceed 26 billion, exceeding expectations. In terms of profitability, the company's gross profit margin was 25.56% in 2025, with a net profit margin of 14.88%. The asset-liability ratio was 42.25%, a year-on-year decrease of 5.99 percentage points; operating cash flow was 389.95 billion, a year-on-year increase of 14.75%; it is also worth noting that the company's capital expenditure in 2025 was 10.657 billion, with future capital commitments for building factories at 5.833 billion, compared to 2024 (capital expenditure of 12.609 billion with future capital commitments for building factories at 7.455 billion) have decreased, the bank speculates that the company's future operating cash flow will be more abundant. In terms of business segments: 1) Aluminum alloy had sales volume of 5.824 million tons, flat year-on-year, with an average selling price of 18,216 yuan/ton (excluding tax), a year-on-year increase of 3.8%; revenue was 106.096 billion, a year-on-year increase of 3.6%; gross profit margin was 28.5%, an increase of 3.9 percentage points. 2) Alumina had sales volume of 13.397 million tons, a year-on-year increase of 22.7%, with an average selling price of 2,899 yuan/ton (excluding tax), revenue of 38.834 billion, a year-on-year increase of 4.0%; gross profit margin was 22.2%. 3) Aluminum alloy processing, with sales of deep-processed products at 716,000 tons, flat year-on-year, with an average selling price of 20,874 yuan/ton (excluding tax), revenue of 14.956 billion, a year-on-year increase of 4.0%; gross profit margin was 19.2%.